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Risk Insider: Jack Hampton

Colleges that Don’t Adapt to Modern Needs Face Bankruptcy

By: | May 17, 2018 • 2 min read
John (Jack) Hampton is a Professor of Business at St. Peter’s University and a former Executive Director of the Risk and Insurance Management Society (RIMS). His recent book deals with risk management in higher education: "Culture, Intricacies, and Obsessions in Higher Education — Why Colleges and Universities are Struggling to Deliver the Goods." His website is www.jackhampton.com.

When I moved to Connecticut in the 1990s, I visited a factory that manufactured the PowerLock tape measure. The site was New Britain, with an official nickname “Hardware City” reflecting a history as a manufacturing center. It was the headquarters of The Stanley Works.

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Everybody was patiently waiting for the rebound of manufacturing that would bring back jobs. It never happened. New Britain would never again be the center for manufacturing hammers, screwdrivers, and the ilk.

The Connecticut refusal to acknowledge that the world had changed caused the state to linger years behind the rest of the country overcoming an economic recession. Recovery happened only when the state accepted technological and economic realities and went in new directions.

Higher education faces a similar challenge today. For the majority of colleges and universities, the traditional model is broken in at least four areas:

  • The academic culture is largely isolated from the realities faced by parents, students, politicians, and society.
  • Professors are languishing in a career field where they struggle on all sides.
  • Too many courses and teaching methods are on life support.
  • The role and value of academic research is problematic.

And according to a recent opinion piece in the New York Times, paying for a college education for many may not be a wise investment.

This is a serious risk management situation, at least as seen by Harvard professor Clayton Christensen. He predicts bankruptcy or forced merger of half of all U.S. colleges and universities in the next 10 years.

Bankruptcy just happened to Mount Ida College in Massachusetts. The former finishing school for girls founded in 1899 lost its way. It is closing and will be taken over by a public university. Some 1,500 students have to scramble to finish their degrees. Hundreds of professors and staff are losing their jobs.

Massachusetts Attorney General Maura Healey also thinks this is a serious risk management issue. She just launched an investigation into the behavior of senior administrators at Mount Ida. Did they violate fiduciary obligations when they abruptly announced the closure of the school?

For the majority of colleges and universities, the traditional model is broken in at least four areas.

The attorney general raises a serious question. Every year around the time of the RIMS annual meeting, I ask myself the same question. When will colleges and universities recognize the real risk that faces them? The answer is always the same. Not yet.

We might look to Sweet Briar College to see the future. In 2015, the all-women liberal-arts college in Virginia cited declining enrollments and “insurmountable” financial challenges as the reason it would shut down. Subsequently, more than 700 alumni rallied with current students in support of continuing operations. The Board reversed the decision and began efforts to keep the school in operation.

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Recently, Sweet Briar published details on its curricular and academic changes. It will cut in half the number of major programs and shift the curriculum to courses that better reflect student academic interests and careers. Topics will address sustainable systems, leadership, persuasion, and decision making in a data-driven world.

The actions have harsh realities. Faculty members who failed to change will lose their jobs, even as new teachers will be hired with the skills needed to fulfill adjusted learning goals.

Mount Ida and Sweet Briar bring us back to Connecticut. Are we waiting for students and parents to buy our hammers? If that is not likely, we need to change. The time is now. The place is here. The path is visible. Colleges that fail to address needed change are in mortal danger. So are many of their professors.

More from Risk & Insurance

More from Risk & Insurance

Risk Report: Manufacturing

More Robots Enter Into Manufacturing Industry

With more jobs utilizing technology advancements, manufacturing turns to cobots to help ease talent gaps.
By: | May 1, 2018 • 6 min read

The U.S. manufacturing industry is at a crossroads.

Faced with a shortfall of as many as two million workers between now and 2025, the sector needs to either reinvent itself by making it a more attractive career choice for college and high school graduates or face extinction. It also needs to shed its image as a dull, unfashionable place to work, where employees are stuck in dead-end repetitive jobs.

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Added to that are the multiple risks caused by the increasing use of automation, sensors and collaborative robots (cobots) in the manufacturing process, including product defects and worker injuries. That’s not to mention the increased exposure to cyber attacks as manufacturers and their facilities become more globally interconnected through the use of smart technology.

If the industry wishes to continue to move forward at its current rapid pace, then manufacturers need to work with schools, governments and the community to provide educational outreach and apprenticeship programs. They must change the perception of the industry and attract new talent. They also need to understand and to mitigate the risks presented by the increased use of technology in the manufacturing process.

“Loss of knowledge due to movement of experienced workers, negative perception of the manufacturing industry and shortages of STEM (science, technology, engineering and math) and skilled production workers are driving the talent gap,” said Ben Dollar, principal, Deloitte Consulting.

“The risks associated with this are broad and span the entire value chain — [including]  limitations to innovation, product development, meeting production goals, developing suppliers, meeting customer demand and quality.”

The Talent Gap

Manufacturing companies are rapidly expanding. With too few skilled workers coming in to fill newly created positions, the talent gap is widening. That has been exacerbated by the gradual drain of knowledge and expertise as baby boomers retire and a decline in technical education programs in public high schools.

Ben Dollar, principal, Deloitte Consulting

“Most of the millennials want to work for an Amazon, Google or Yahoo, because they seem like fun places to work and there’s a real sense of community involvement,” said Dan Holden, manager of corporate risk and insurance, Daimler Trucks North America. “In contrast, the manufacturing industry represents the ‘old school’ where your father and grandfather used to work.

“But nothing could be further from the truth: We offer almost limitless opportunities in engineering and IT, working in fields such as electric cars and autonomous driving.”

To dispel this myth, Holden said Daimler’s Educational Outreach Program assists qualified organizations that support public high school educational programs in STEM, CTE (career technical education) and skilled trades’ career development.

It also runs weeklong technology schools in its manufacturing facilities to encourage students to consider manufacturing as a vocation, he said.

“It’s all essentially a way of introducing ourselves to the younger generation and to present them with an alternative and rewarding career choice,” he said. “It also gives us the opportunity to get across the message that just because we make heavy duty equipment doesn’t mean we can’t be a fun and educational place to work.”

Rise of the Cobot

Automation undoubtedly helps manufacturers increase output and improve efficiency by streamlining production lines. But it’s fraught with its own set of risks, including technical failure, a compromised manufacturing process or worse — shutting down entire assembly lines.

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More technologically advanced machines also require more skilled workers to operate and maintain them. Their absence can in turn hinder the development of new manufacturing products and processes.

Christina Villena, vice president of risk solutions, The Hanover Insurance Group, said the main risk of using cobots is bodily injury to their human coworkers. These cobots are robots that share a physical workspace and interact with humans. To overcome the problem of potential injury, Villena said, cobots are placed in safety cages or use force-limited technology to prevent hazardous contact.

“With advancements in technology, such as the Cloud, there are going to be a host of cyber and other risks associated with them.” — David Carlson, U.S. manufacturing and automobile practice leader, Marsh

“Technology must be in place to prevent cobots from exerting excessive force against a human or exposing them to hazardous tools or chemicals,” she said. “Traditional robots operate within a safety cage to prevent dangerous contact. Failure or absence of these guards has led to injuries and even fatalities.”

The increasing use of interconnected devices and the Cloud to control and collect data from industrial control systems can also leave manufacturers exposed to hacking, said David Carlson, Marsh’s U.S. manufacturing and automobile practice leader. Given the relatively new nature of cyber as a risk, however, he said coverage is still a gray area that must be assessed further.

“With advancements in technology, such as the Cloud, there are going to be a host of cyber and other risks associated with them,” he said. “Therefore, companies need to think beyond the traditional risks, such as workers’ compensation and product liability.”

Another threat, said Bill Spiers, vice president, risk control consulting practice leader, Lockton Companies, is any malfunction of the software used to operate cobots. Then there is the machine not being able to cope with the increased workload when production is ramped up, he said.

“If your software goes wrong, it can stop the machine working or indeed the whole manufacturing process,” he said. “[Or] you might have a worker who is paid by how much they can produce in an hour who decides to turn up the dial, causing the machine to go into overdrive and malfunction.”

Potential Solutions

Spiers said risk managers need to produce a heatmap of their potential exposures in the workplace attached to the use of cobots in the manufacturing process, including safety and business interruption. This can also extend to cyber liability, he said.

“You need to understand the risk, if it’s controllable and, indeed, if it’s insurable,” he said. “By carrying out a full risk assessment, you can determine all of the relevant issues and prioritize them accordingly.”

By using collective learning to understand these issues, Joseph Mayo, president, JW Mayo Consulting, said companies can improve their safety and manufacturing processes.

“Companies need to work collaboratively as an industry to understand this new technology and the problems associated with it.” — Joseph Mayo, president, JW Mayo Consulting

“Companies need to work collaboratively as an industry to understand this new technology and the problems associated with it,” Mayo said. “They can also use detective controls to anticipate these issues and react accordingly by ensuring they have the appropriate controls and coverage in place to deal with them.”

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Manufacturing risks today extend beyond traditional coverage, like workers’ compensation, property, equipment breakdown, automobile, general liability and business interruption, to new risks, such as cyber liability.

It’s key to use a specialized broker and carrier with extensive knowledge and experience of the industry’s unique risks.

Stacie Graham, senior vice president and general manager, Liberty Mutual’s national insurance central division, said there are five key steps companies need to take to protect themselves and their employees against these risks. They include teaching them how to use the equipment properly, maintaining the same high quality of product and having a back-up location, as well as having the right contractual insurance policy language in place and plugging any potential coverage gaps.

“Risk managers need to work closely with their broker and carrier to make sure that they have the right contractual controls in place,” she said. “Secondly, they need to carry out on-site visits to make sure that they have the right safety practices and to identify the potential claims that they need to mitigate against.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]